9911796707
TMI Blog1982 (8) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to convert 20% of the value of the debentures held by it into equity shares. Each of the debenture-holders exercised the option to convert to the full extent on May 31, 1979, itself and was allotted the 43.750 shares on June 5, 1979. The shares are more particularly described in Ex. S to the plaint. The suit is filed by two shareholders of the company, members of the Berlia family who are shareholders of the company in a substantial way. The plaint is verbose, even argumentative. It sets out the history of the Berlia shareholding in the company, the freezing order under section 108D of the Companies Act passed in respect thereof, the writ petition filed to quash it, the failure of the company to register further shares of the Berlias, and the proceedings adopted to compel registration thereof. The plaint also sets out the history of the debentures and shares in suit. The plaint challenges the whole issue of the debentures and the issue of the shares upon their conversion. Many of these challenges are not pressed. In considering the challenges that are pressed, it will be necessary to refer to portions of the plaint. It is, therefore, that I do not here undertake the labor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n receipt of earlier intimation from the person to whom such notice is given that he declines to accept the shares offered, the Board of directors may dispose of them in such manner as they think most beneficial to the company. Explanation.-In this sub-section, 'equity share capital' and ' equity shares ' have the same meaning as in section 85. (1A) Notwithstanding anything contained in sub-section (1), the further shares aforesaid may be offered to any persons whether or not those persons include the persons referred to in clause (a) of sub-section (1) in any manner whatsoever- (a)if a special resolution to that effect is passed, by the company in general meeting, or (b)where no such special resolution is passed, if the votes cast (whether on a show of hands, or on a poll, as the case may be) in favour of the proposal contained in the resolution moved in that general meeting (including the casting vote, if any, of the Chairman) by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy, exceed the votes, if any, cast against the proposal by members so entitled and voting and the Central Government is satisfied, on an application made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company. Nothing in the section shall apply to the increase of the subscribed capital of a public company caused by the exercise of an option attached to debentures issued by the company to convert such debentures into shares in the company, provided that the terms of issue of such debentures include a term providing for such option and such term has been approved by the Central Govt. before the issue of the debentures and, in case of debentures other than debentures issued to any institution specified by the Central Govt. in this behalf, such term has also been approved by a special resolution passed by the company in general meeting before the issue of the debentures. Proved facts: Surrounding circumstances. The facts regarding the issue of the debentures and shares have to be appreciated in the light of certain surrounding circumstances commencing with the date, July 11, 1977, when the Company Law Board, in exercise of the powers under section 408 of the Companies Act, appointed 8 persons to hold office as directors of the company from the date of the order in order to prevent the affairs of the company from being conducted in a manner prejudicial to it. At that point of tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record. They show that the chairman explained that the Berlias had already registered in their names 68,853 equity shares and they had also got transferred some 6,000 preference shares ; that there was a strong suspicion that most of the transferees of 23,113 equity shares which had been lodged with the company for registration were nominees of the Berlia group ; that according to reports received by the committee, the Berlia group had obtained a total of 1,74,127 proxies as against 1,08,000 mustered by the institutions ; that the Berlias had filed nominations for the appointment of 2 directors on the company's board. In view of the large number of proxies obtained by the Berlias it was obvious to the committee that the Berlias were trying to gain controlling interest in the company and this would be prejudicial to the company's affairs; besides, if the Berlias were able to put their nominees on the company's board they would be able to gain knowledge of all the happenings in the company to further their interests. It was decided by the committee that directions should be given to the company either under section 108D or under section 408 not to effect transfers of shares exceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlia group had participated in the malpractices of the earlier group in management, the Kapadias. The letter stated that the Berlia group had a large quantity of shares which they had got transferred in their own names or in the names of their nominees. The annual general meeting (AGM) of the company was now scheduled to be held on June 29, 1978. After April 3, 1978, the Berlia group had lodged several transfer applications in respect of equity and preference shares of the company in their names and in the names of their nominees. The shareholders of the company had been issued a circular purported to have been signed by R. M. Goculdas, Chairman of M/s. Dharamsi Morarji Chemical Co. Ltd., R. V. Ramani, Managing Director of Mettur Chemicals and Industrial Corporation Ltd., and S.C.L. Jain, managing director of M/s. Punjab National Fertilisers and Chemicals Ltd. They had been told by Goculdas that he had not signed the circular. They were awaiting replies from the other two gentlemen. The circular recommended to the shareholders that they issue proxies in favour of one or the other of the plaintiffs or their father. The circular had been posted by the Berlia concerns. From this it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting of the company held on April 3, 1978, for the appointment of two of their nominees as directors of the company ; that the Berlia group had been involved in a number of irregularities committed by the Kapadia group in the affairs of the company prior to the appointment by the Central Govt. of persons to hold office as directors of the company under section 408 ; that the Central Govt. was satisfied upon the facts enumerated above and upon the report received from the company that, as a result of the transfer of any share or block of shares of the company, a change in the controlling interest of the company was likely to take place and that such change was prejudicial to the interests of the company. The order directed the company not to to give effect to the transfer of any such shares or block of shares and (a) where the transfer of such share or block of shares had already been registered, not to permit the transferee or any nominee or proxy of the transferee to exercise any voting or other rights attached to such share or block of shares, and (b) where the transfer of such share or block of shares had not been registered, not to permit any nominee or proxy of the transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 78, this court passed the interim order, inter alia, in these terms: "There would be an injunction in terms of prayer (c ) on the following conditions. At the meeting to be held on June 29, 1978, or at the adjourned meeting in respect of items 2 and 4 on the agenda of the meeting or any amendment thereof as mentioned by the learned counsel for respondent No. 3 (the draft of which has been handed over to the court and which is taken on file) the petitioners undertake to the court to exercise their voting rights in respect of their 69,633 shares mentioned in para I of the petition and in respect of proxies held by them in respect of which the petitioners are entitled to vote in favour of said items and the said amendment thereof. As regards items 1 and 3 on the said agenda and also as regards those terms or resolution in respect of which notice of moving resolution at the said meeting has been given to the 3rd respondent, the petitioners are at liberty to exercise at the said meeting or adjourned meeting all their rights including voting rights, a right to demand poll and right to contest. The chairman of the meeting, however, shall not declare the result of the voting on poll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, 1980, the Supreme Court heard the special leave petition filed by the Union of India in respect of the order on the writ petition. The Supreme Court recorded that the Solicitor-General had made a statement on behalf of the CLB and the Govt. of India that the proposals in the letter written by the plaintiffs' advocates to the CLB were acceptable. Accordingly, the Supreme Court passed an order in terms of the proposals contained in the letter and stated that these were deemed to be the directions of the court. The Supreme Court stated that in view of these final orders, the findings of the trial court would not remain in operation but the final order passed by the trial court would. The special leave petition was allowed to be withdrawn. On January 21,1980, the CLB informed the company of the order passed by the Supreme Court and directed the company to implement fully the proposals in the letter of January 5, 1980, a copy whereof was enclosed. There was considerable correspondence between the attorneys of the plaintiffs and the attorneys of the company, subsequent to the passing of the order by Shah J. on the writ petition in respect of the declaration of the result of the elec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CICI forwarded to the company cheques for Rs. 20,00,000 each towards the disbursement of the bridging loan of Rs. 40,00,000. On March 8, 1978, ICICI wrote to the company with reference to the loan of Rs. 48 lakhs and sent therewith a draft loan agreement. Article 3(2) of the draft agreement set out the conversion right but left blank the value of the loan which could be converted, the period during which and the price at which the conversion could be effected. On March 17, 1978, the company wrote to the UTI and confirmed acceptance of the terms contained in UTI's letters dated June 17, 1978, April 24, 1978, and March 13, 1978. The letter stated that the company would be grateful if UTI placed with them the deposit of Rs. 50 lakhs. This was done. On May 19, 1978, a meeting was held of the special executives of the institutions. The summary record of its proceedings is on record. The terms of option for the conversion of the loan into equity in respect of the aggregate loan of Rs. 108 lakhs for the nylon tyre cord project, phase II, was discussed in relation to the settlement of the terms of an option for the conversion of the loan into shares and it was decided that 20% of the loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The committee of directors and the board of directors have earlier felt that a programme of modernisation/expansion/diversification should be drawn up and implemented to improve the long-term profit profile of the company. We would, therefore, seek your help for the first phase of the programme of modernisation in regard to the following : Rs. lakhs Rayon Plant-8 spinning machines 120 Bleaching machine 80 Evaporation systems 25 Miscellaneous 30 255 Anhydrous Sodium Sulphate Plant 100 100 T. Sulphuric Actd Plant 100 Rectifier System Changes 25 Modernisation Programme Cost 480 (Brief note on each item is attached) The above figures are very tentative and detailed estimates are being worked out for placing before our board at its next meeting to be held on June 29, 1978. We may mention that out of the above items, we propose to take capital expenditure programme of approximately Rs. 3 crores in the first phase and would be grateful to have your concurrence that you would be able to give us the term loan through privately placed debentures on usual terms a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther processing for a sanction of the balance assistance required from the other institutions. The consensus was that UTI should sanction the increased assistance of Rs. 300 lakhs and should exercise its conversion option to the extent of 20 per cent during the period January 15, 1978, to June 14, 1980. On June 1, 1978, UTI prepared a note for circulation to its executive committee. It recorded that UTI had circulated the note for consideration at the IIM on May 31, 1978. It reproduced the figures contained in the company's letter dated May 19, 1978, and stated that the figures were tentative and detailed estimates were being worked out by the company. The institutions would carry out an appraisal of the modernisation programme and examine it further. The company had not furnished firm figures regarding the proposed modernisation scheme, its financial requirements, profitability estimates after the modernisation scheme was implemented, etc. However, even on the basis of profitability estimates worked out by ICICI in December, 1977, without taking into account the modernisation scheme, the company's operations were likely to show an operating profit of Rs. 56 lakhs in 1978, rising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approach the Controller of Capital Issues/Government of India for necessary approval." In respect of what transpired between May 29, 1978, and June 1, 1978, there is some evidence on record, of Atmaramani, an officer of UTI, and of Shingal, an officer of ICICI. It does not contain much by way of facts. Some reference will be made to it when dealing with the contentions. I do not consider it necessary to set it out here. On June 2, 1978, the company wrote to UTI in relation to the term loan assistance of Rs. 300 lakhs and the discussions with UTI's Chairman whereat it had learnt that its request had been favourably considered at the IIM of May 31, 1978. The letter recorded that UTI's Chairman had mentioned that the term loan would carry a right to subscribe to shares of the company equivalent to 20% of the term loan at the rate of Rs. 160 per share during the period June 15, 1978, to June 14, 1980. The letter recorded that the proposal had been put up before the company's committee of directors and had been accepted by them, except for the share premium amount, and that the proposal would be put up before the board of directors on June 7, 1978. The letter, after mentioning severa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istance for the company's modernisation programme. Please refer to our letter No UT-14973/RS(N-14) 78 dated June 1, 1978, agreeing in principle to provide to your company financial assistance of Rs. 300 lakhs jointly with other financial institutions in connection with the company's modernisation programme. In terms of clause (7) of the above letter, the Trust has the right to acquire, in lieu of conversion, fully paid-up equity shares of the company of Rs. 60 lakhs (which is equivalent to 20 per cent. of the debentures agreed to be subscribed by the Trust) at any time during the period June 15, 1978, to June 14, 1980. The amount of 60 lakhs is inclusive of a premium amount of Rs. 22.50 lakhs (i.e., premium of Rs. 60 per share of Rs. 100) or such premium as may be approved by the Controller of Capital Issues. In pursuance of the said clause, we hereby give notice of our intention to acquire with effect from June 15, 1978, fully paid up equity shares of your company of a total amount of Rs. 60 lakhs (including premium amount of Rs. 22.50 lakhs, i.e., Rs. 60 per share of Rs. 100 or such premium as may be approved by CCI) against payment by us of an amount of Rs. 60 lakhs. We agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wrote to GIC to state that GIC's letter addressed to the company had been delivered and necessary action regarding conversion of shares would be taken up shortly. On June 20, 1978, the Controller of Capital Issues wrote to the company consenting to the issue of "51,000 equity shares of Rs. 100 each at the premium of Rs. 60 per share, credited as fully paid up, to ICICI and UTI in conversion of a part of their loan/debentures to the extent of Rs. 81,60,000 (including the premium) out of the loan/debentures sanctioned to the company". On June 23, 1978, the CLB wrote to the company in respect of the application made by the company under section 81(3) of the Companies Act for the approval of the raising of convertible debentures. The letter stated that it was observed from UTI's letter of June 6, 1978, that UTI had already given notice for exercising its option to convert an amount of Rs. 10 lakhs out of the total advance deposit of Rs. 50 lakhs against UTI's commitment to subscribe to the proposed privately placed debentures issue and that UTI's commitment to subscribe to the debentures would thereafter stand reduced to Rs. 40 lakhs. The CLB requested the company to clarify whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be substituted by the words, "ICICI, UTI, GIC and its subsidiaries". On October 5, 1978, the Controller of Capital Issues wrote to the company regarding the company's request to increase the amount of premium from Rs. 60 to Rs. 80 per share. The letter stated that the Government had considered the matter in the light of the company's representation but regretted its inability to accede to it. On October 16, 1978, GIC wrote to the company stating its intention to subscribe, along with its subsidiaries, to debentures worth Rs. 50 lakhs out of the total debenture issue of Rs. 300 lakhs. The letter stated the terms and conditions upon which the sanction would be subject to. C1. 4 required the company to agree to vest in GIC and its subsidiaries the option to acquire, in lieu of conversion, shares of Rs. 10 lakhs, the period of conversion being June 15, 1978, to June 14, 1980. The subsidiaries also sent such letters of intent. On October 18, 1978, the company sent to an officer in the projects dept. of ICICI a copy of the modernisation programme. It is the evidence of Singhal, chief of the projects dept. of the ICICI, that in making the detailed appraisal or assessment of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter approved the issue of convertible debentures of the value of Rs. 50 lakhs to be issued to the ICICI. On April 7, 1979, M/s. Amarchand & Mangaldas & Hiralal Shroff & Co., the common attorneys for the institutions and the company, wrote to the institutions, the company and the debenture trustee with reference to the previous correspondence and a joint meeting and enclosed therewith a note of the discussion thereat. One of the items discussed was that the company would take steps to approach the CLB for a modification of the sanction granted under section 81 so as to clearly specify that the convertible debentures would be to the extent of Rs. 350 lakhs in the aggregate and not only Rs. 70 lakhs. Another item discussed was that the company would take expeditious steps for the creation of securities to secure the debentures and the ICICI term loan as the institutions "were anxious to complete the transaction latest by May 30, 1979". On April 25, 1979, ICICI wrote to the CLB with reference to the orders issued regarding the conversion of debentures. The letter stated that since the company would be actually issuing to ICICI convertible debentures of the value of Rs. 50 lakhs out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the debenture trust deed and the affixing thereon of the company's seal. Item 8 stated that UTI and ICICI would issue letters of adjustment in respect of the advances made by them towards the debenture subscription and also issue cheques for the balance amount and apply for subscription of the debentures. Item 9 stated that GIC and its subsidiaries would also apply for subscription and issue requisite cheques for the value of the debentures to be subscribed for by them. Item 10 stated that the company would issue letters of allotment of debentures to the debentureholders. Item 11 stated that after the letters of allotment were received the debentureholders would issue notices of conversion to the company and upon receipt of such notices of conversion, the company would issue letters of allotment of shares and also execute contracts in respect of the shares to be allotted under section 75 of the Companies Act. Item 13 stated that the company would issue share certificates for the converted amount to the debentureholders. In respect of ICICI's term loan of Rs. 58 lakhs a similar programme was chalked out. On May 30, 1979, the common attorneys wrote to the company enclosing a dra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forms set out in Parts I to VII respectively of the Fifth Schedule hereunder written under the provisions of and secured by these presents.............." The "debenture holders" are defined to mean "the holders for the time being of the debentures so issued............on the conditions endorsed on the debentures............" Under clause 2, the debentures "issued hereunder and which are entitled to the benefit of these presents" are 35,000 11% convertible debentures of the nominal amount of Rs. 1,000 each and comprised of 25,000 series "A" debentures, 5,000 series "B" debentures, 1,000 debentures each of series C, D, E, F and G, all carrying interest at the rate of 11% per annum and in the forms set out in Pts. I to VII of the Fifth Schedule therein written. Clause 2 contains the covenant to repay and sets out the redemption instalments. It provides that if for any reason the amount of subscription to the debentures of any series was less than the total amount, the relative redemption instalments would stand reduced pro rata. Clause 4 contains the right of conversion. Sub-clause (a ) deals with the right of conversion of UTI. The subsequent sub-clauses deal with the rights of con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of allotment, to each debentureholder, free of charge, a debenture certificate in respect of his holding showing on the face thereof the denomination, number and the amount of debentures. Under sub-clause (C) of clause 36, the company was obliged to duly observe and perform all the terms and conditions contained in the loan agreements and not to commit any breach or default thereof. The Fifth Schedule of the debenture trust deed sets out the form of debentures to be issued to the institutions. Part I relates to the series A debentures to be issued to UTI. Clause 5 thereof sets out the mode and form in which the debentureholders are required to exercise their right of conversion. Sub-clause (i) of clause 5 is reproduced : "UTI as the registered holder of the series 'A' debentures of the aggregate nominal value of Rs. 250,00,000 (Rupees two hundred and fifty lakhs) shall to the extent of such series 'A' debentures of the nominal value of Rs. 50,00,000 (Rupees fifty lakhs) at any time and from time to time between the 15th day of June, 1978, and 14th day of June, 1980, (both days inclusive) by notice in writing of not less than one month given either before or during the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es option of conversion-exercise of. Pursuant to our application for subscription in respect of 25,000 convertible debentures of Rs. 1,000 each of the aggregate face value of Rs. 2,50,00,000 (Rupees two crores fifty lakhs only) on the 31st day of May, 1979, accompanied by the remittances of the unsubscribed portion being Rs. 175 lakhs and by way of an adjustment against the advance deposit being Rs. 75 lakhs your company has agreed to issue a letter of allotment whereby you would be allotting to us 25,000 convertible debentures of Rs. 1,000 each of your company. Pursuant to the letter of intent No. UT/ 9578/RS ( N-14) 77-78, dated 17th January, 1978, and further letter No. UT/ 14973/RS ( N-14) 78, dated 1st June, 1978, and accepted by the company all of which represent the loan agreement, and in terms of clause 4(a) of the debenture trust deed dated the 31st day of May, 1979, made between the company and Bank of Baroda as Trustees, the Unit Trust of India as debenture holders of series 'A' debentures is entitled to call for allotment 31,250 fully paid up equity shares of Rs. 100 each of the company of the aggregate nominal face value of Rs. 31,25,000 (Rupees thirty one lakhs twen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oneys ready on 1st June, 1979, for, he had been told that that was the day on which the company would execute the document. The note is on record. It required that he should be sent the cheque by 4-00 p.m. on 31st May, 1979, but he deposed that he called for it after lunch on 31st May, 1979. He was not present at the meeting of 31st May, 1979, but had handed over the letter of subscription to the debentures, the cheque and the notice of conversion, all signed by him, to Poojara, one of UTI's officers. On 5th June, 1979, shares pursuant to the conversions were allotted to the institutions. Plaintiff's Counsel's statement Before I proceed to discuss the contentions that were pressed, I must record a statement made by Mr. Cooper, learned counsel for the plaintiffs. Mr. Cooper stated that "for the purposes of this suit only- (a)the plaintiffs will not contest that the debenture trust deed dated 31st May, 1979, was void. (b)the plaintiffs will not rely on any allegation regarding the conduct of the adjourned 33rd annual general meeting or any contention based thereon, as the 1st plaintiff and another have filed a separate suit in respect thereof. (c)the plaintiffs are not making o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1847] 1 Ph 790 and Fossv. Harbottle [1843] 2 Hare 461." In Burland v. Earle [1902] AC 83, the Privy Council said that it was an elementary principle of the law relating to joint stock companies that the court would not interfere with the internal management of companies acting within their powers, and in fact had no jurisdiction to do so. Again, it was clear law that in order to redress a wrong done to the company or to recover moneys or damages alleged to be due to the company, the action should prima facie be brought by the company itself. In Edwards v. Halliwell [1950] 2 All ER 1064, Jenkins L.J. said (at p. 1066): "The rule in Foss v. Harbottle [1843] 2 Hare 461, as I understand it, comes to no more than this. First, the proper plaintiff in an action in respect of a wrong alleged to be done to a company or association of persons is prima facie the company or the association of persons itself. Secondly, where the alleged wrong is a transaction which might be made binding on the company or association and on all its members by a simple majority of the members, no individual member of the company is allowed to maintain an action in respect of that matter for the simple reason t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idual shareholder's right to rectify the company's share register was recognised by section 155 of the Companies Act. Reference was made in this context to an unreported judgment of a Division Bench of this court in Appeal No. 344 of 1981 in Company Application No. 169 of 1981, in Company Petition No. 196 of 1981, delivered on 9th September, 1981-since reported as Killick Nixon Ltd. v. Dhanraj Mills Pvt. Ltd.[1983] 54 Comp. Cas. 432 (Bom.). It was there contended that only a person aggrieved by an incorrect or wrong entry in the share register was entitled to file a petition under section 155 for a rectification of the register. It was contended that the expression "any member" in that section meant only a member who was aggrieved or who was in a position to show that some prejudice or wrong was caused to him. The court declined to accept the submission and held that any member was entitled to apply for a rectification under section 155 without being compelled to show that he was aggrieved or any prejudice had been caused to him. Counsel for the defendants submitted that this judgment, though of a Division Bench of this court, was not binding because it was delivered in an appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of section 38 of the Indian Companies Act, 1913, which provided for a rectification of the share register. In my view, every shareholder of a company has an individual right and interest in seeing that the share register of the company reflects the true position. Upon the share register rests each shareholder's right to receive his due share of the company's profits by way of dividend, his right to exercise his vote and to have it correctly assessed as against the votes of other rightful shareholders, and his right to acquire new shares in the company pro rata with other rightful shareholders. An entry in the register which is bad or illegal affects these rights of the individual shareholder. He is thereby prejudiced and aggrieved. The right to rectify was recognised at common law and was translated into the statutes, English and Indian. (The provisions of section 116 of the English Companies Act, 1948, provide to any member of the company the right to apply for a rectification of the company's share register). The statutes do not create any new right in the member. In England, as in most High Courts in India, it is recognised that the procedure of rectification made available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requisite to hear the debenture trustee, by reason of the frame of the suit, it must be held to be bad for non-joinder. Secondly, it was urged that if the institutions were restored to the position of being debenture holders the debenture trustee would hold the same security for a larger number of debenture holders than heretofore and that, therefore, the debenture trustee is a necessary party. That does not, in my view, make the debenture trustee a party that ought to have been impleaded. Article 18 of the articles of association Mr. Cooper argued that no option could be given to any person to call for shares unless the company in general meeting had so resolved and he relied for this purposes upon article 18 of the company's articles of association; the general body having passed no such resolution before the shares were allotted to the institutions, the allotment of the shares was bad. Article 18 reads thus : "In addition to and without derogating from the powers under article 15, the company in general meeting may determine that any shares (whether forming part of the original capital or of any increased capital of the company) shall be offered to such persons (whether me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the right is so exercised" by the debenture holder "in the manner set out in the form of debentures in the 5th Schedule hereunder written". The form of debentures requires the delivery to the registered office of the company of a notice of conversion of not less than one month "accompanied by the relative debenture certificate" and states that the debenture holder shall be entitled to call for allotment "in respect of such..................debentures so intended to be converted.......". Clause 23 of the debenture trust deed requires the debenture holder "to surrender such debentures to be so converted to the company within thirty days from the date of conversion notice....for the purpose of necessary memorandum to be made by the company thereon indicating the cancellation or extinguishment of each of such debentures and the conversion into fully paid up equity shares..." It must be noted that the option to convert is vested only in the first holders of the debentures, that is to say, only in the institutions; transferees of the debentures would not be entitled to call for a conversion thereof into shares. It must also be noted, as clause 23 of the debenture trust deed makes clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the register. In find it difficult to agree with Mr. Cooper's submission that the right or option to convert came to exist only upon registration. Basically, the requirement is set out for the company's benefit, as describing a debenture holder who has been recognised by the company by virtue of the fact that his name has been entered by the company in its register of debenture holders in respect of his debenture certificates. The company would be entitled to refuse to recognise an exercise of the option by a debenture holder whose name is not entered on the register, but there is nothing to prevent the company from recognising and giving effect to the exercise of the option by such a debenture holder. The company is entitled to waive the requirement imposed for its benefit; and it may do so by express waiver or by conduct. Option not exercised in due form Mr. Cooper contended that since the institutions had not given to the company's registered office one month's advance notice of the exercise of the option to convert, the institutions had not exercised the option in the manner and from requisite and, consequently, the issue of the shares upon such conversion was bad. It is cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of shares. He urged that the transaction of May 31, 1979, had to be seen as one and indivisible and in its reality. Reference was made by Mr. Cooper to the judgment of the Court of Appeal in Manks v. Whiteley [1912] 1 Ch. 735. What was relied upon comes from the judgment of Fletcher Moulton L.J. It runs : ".....................But I say it to emphasize the principle that where several deeds form part of one transaction and are contemporaneously executed they have the same effect for all purposes such as are relevant to this case as if they were one deed. Each is executed on the faith of all the others being executed also and is intended to speak only as part of the one transaction, and if one is seeking to make equities apply to the parties they must be equities arising out of the transaction as a whole. It is not open to third parties to treat each one of them as a deed representing a separate and independent transaction for the purpose of claiming rights which would only accrue to them if the transaction represented by the selected deed was operative separately......................" This decision was followed by the Supreme Court in S. Chattanatha Karayalar v. Central Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a right to purchase. The real transaction between the institutions and the company was not the giving of the loan of Rs. 300 lakhs and the conversion thereof into shares but was the giving of a loan plus the purchase of shares. This transaction was contemplated by the debenture trust deed and would have been a valid transaction if there had been a special resolution in that behalf. There was nothing which could have prevented the institutions from exercising the right of purchase in a legal manner or of giving up that right and effecting a real conversion of the loan. The debenture trust deed recorded both rights and the fact that parties had agreed to the exercise of the right of purchase did not invalidate the right of conversion. In fact, the whole transaction was on the footing that the right of conversion and was it corollary (sic). Mr. Cooper's submission has its foundation in this: that the debenture trust deed recorded and conferred upon the institutions the right to acquire shares in lieu of conversion. As I read UTI's letter of June 1, 1978, the right to acquire shares in lieu of the right of conversion mentioned therein was to operate in advance of and in lieu of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso be pointed out that the agreements to allot shares mention that interest would be payable upon the debentures until the shares in conversion thereof were issued. This also goes to establish that Rs. 70 lakhs were not paid, to begin with, as application monies but were intended to be a loan on which interest at the debenture rate was payable until shares in conversion were allotted. Coming as I do to this conclusion, I do not rely upon the documents on record which prima facie establish that it was the right of conversion which was exercised and that conversion took place. It was urged by counsel for defendants that it was not open to the plaintiffs to contend that the shares had really been purchased, in view of their counsel's statement that the plaintiffs would not contend that the debenture trust deed was void, and that this would be the inevitable result of the contention being accepted. As I see it, the manner in which the contention has been put by Mr. Cooper does not constitute a challenge to the validity of the statement, which I have earlier set out, expressly reserves this contention (sic). Mala fides of waiver Mr. Cooper urged that the waiver by the company of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : "...................With this very motive on 31-5-1979 the debentures were privately placed and issued to the financial institutions and loans raised from them both of which gave an option to the financial institutions to obtain and acquire shares by exercising such option to the extent of 51,000 shares........ On the same day, that is to say, May 31, 1979, options were exercised by the financial institutions (though not in accordance with the terms of the option) and shares are shown to have been registered in the names of the financial institutions on June 6, 1979." Sub-paragraph (i) of para 72F of the plaint avers that the company's directors procured execution of the debenture trust deed on May 31, 1979. Some of its provisions are set out. The manner in which the option had to be exercised, i.e., clause 5 of the form of debentures, is also set out. In sub-para (ii) the notice of conversion is extracted. In sub-para (v) it is averred that the institutions thus acquired for themselves voting power. Paragraph 73 opens with the submission that the allotment of shares was wholly null and void, irregular, illegal and fraudulent and had been made by abusing fiduciary duties and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced it would not displace the prima facie case. But that always presupposes that a prima facie case has been established..." (Cockburn C.J. in McQueen v. Great Western Rail Co. [1875] LR 10 QB 569 at 574). It must also be remembered that animus can only rarely be proved by direct evidence. Generally, the party alleging animus proves the circumstances which make the animus probable and the evidentiary burden then shifts to the party against whom the allegation is made to establish that he acted bona fide. Upon this basis in law, I proceed to examine Mr. Cooper's submission The circumstances that he relied on are : That after July, 1977, the Berlias had to file suits in the Bombay City Civil Court and petitions for rectification of the company's share register in this court before the company consented to transfer shares to the names of the Berlias. That even after the agreement and consent terms of December 8, 1977, the company refused to transfer further shares to the Berlias. That in April, 1978, the Berlias demonstrated that the majority of the company's shareholders supported them by lodging about 1,74,000 proxies for an extraordinary general meeting while the institutions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the debentures as provided by the form of debentures. That in para 73(2) of the plaint, it was alleged that the Government nominated directors stood to gain by lending support to the institutions and to submit to their demands, for, there was a quid pro quo, inasmuch as the institutions were anxious to have a continuation of the order under section 408 so that they would have the full control and were requiring the appointment on the board of the same persons as government directors. The paragraphs of the written statements which deal with para 73(e) of the plaint do not contain a denial of the allegation. It was pointed out by counsel for the defendants that it was not put to UTI's witness Atmaramani whether there was any apprehension about the conduct of the Berlias at the 1979 AGM. It is not the apprehension of UTI or of Atmaramani that I am really concerned with, but that of the company and its directors; no director or officer of the company was examined to whom such case could have been put. The letter written by the Chairman of UTI and GIC to the Chairman of the Company Law Board on June 6, 1978, is relevant in this connection. After setting out their apprehensions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notified and the sanctions of the various authorities to the issue of the debentures were still to come. On April 26, 1979, the company notified the AG.M for June 29, 1979. It was submitted that this could have been delayed. The sanctions were yet to come. If any apprehension or animus had existed, it was submitted, the 1 979 AGM would have been scheduled for much later. On May 9, 1979, or thereabouts all the sanctions had come in but the debenture trust deed was not immediately executed. It was suggested that it would have been, if an apprehension or animus had existed, so that there would have been a one month's period before the AGM during which the conversion notice could have been given and the shares issued without waiver. On May 24, 1979, the company's board approved the draft debenture trust deed. It was submitted that on that day there was every intention of operating upon the clause of the form of debenture that required one month's notice of conversion, and that the fact that the board had approved the draft with the clause showed that there was no animus or apprehension. On that day, the board gave powers to four directors to demand or alter the draft. It was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h time the institutions could have got the shares without recourse to waiver. It seems to me that Mr. Cooper was right when he submitted that, having regard to section 210 the AGM had to be called by June 30, 1979, to adopt the company's profit and loss account prepared up to December 31, 1978. It was submitted by counsel for the defendants that the directors could well have acted innocently in waiving the requirements of clause 5. The circumstances on record do not suggest an inference consonant with innocence. Innocence could, however, have been established, and it is not. It was said that clause (5) could have been deleted and nobody would have been any the wiser; instead clause (5) was waived. This is not an inference that may be drawn, but is something which the directors could have deposed to. What could have then been deleted was incorporated in a document and, no sooner was the document signed, waived. It was submitted that since under the document dealing with ICICI's loan and the conversion thereof into shares no advance notice of conversion was required, the directors merely wanted to put the debentures and the loans on a par and they, therefore, waived the requiremen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial institutions. In view of this denial, the argument, that the directors did what they did because they considered the Berlias undesirable people, cannot be put forward to justify what the directors did. Secondly, as will be evident from the authorities to which I shall presently refer, the directors of a company may not disfavor one group of shareholders and favour another, it is a breach of their fiduciary duty to do so. I now proceed to examine the record subsequent to May, 1978, to see what light it throws on the conduct of the company and the institutions. It is necessary to do the latter, in view of the plea that was raised in the course of arguments that, in any event, the institutions were innocent parties who had paid large sums of money by way of loans to the company on condition that they would be entitled to convert a part thereof into shares; against the institutions, therefore, the discretionary relief of rectification should not be granted. It will be recalled that on March 15, 1978, the company had been informed that it had not submitted adequate grounds to the Central Govt. for the issuance of directions under section 108D and that on April 28, 1978, the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng such assistance from a consortium of banks. On May 19, 1978, with rather remarkable solicitude and expedition, UTI offered the company, the same amount for the same purpose. No doubt an institution with a large stake in the company might do so with the best interests of the company at heart. What renders this somewhat suspect here is the term that the conversion option would be exercisable immediately after UTI's terms and conditions were accepted by the company, read in the light of the company's desire to get an order under section 108, a similar desire stated by UTI, and the immediate prospect of the company's AGM. It is clear from the evidence of (sic) that such details as were mentioned in the company's letter of May 29, 1978, in respect of the modernisation programme were of little value. He said, for example, that nobody replaced spinning machines, although this was what the note attached to the company's letter dated May 29, 1978, said would be done, but only modified them to operate at high speed by adding certain attachments. He also said that though the company's letter of May 29, 1978, estimated the expenditure on this item to be Rs. 120 lakhs, the detailed appraisa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proposal for financial assistance was carried out by the institutions before acceptance of the proposal, even in principle. He insisted in cross-examination that in the present case that procedure had been followed, but it had been followed in reverse; the company's proposal was accepted in principle first, in May, 1978, and the detailed appraisal was carried out thereafter, after November, 1978. It was suggested by counsel for the defendants that UTI and the IIM could so act because of earlier appraisal carried out by ICICI. The appraisal is required to be made of the project for which the Joan is sought, here the modernisation programme. No earlier appraisal had been made of the modernisation programme. UTI and the IIM acted without the benefit of such appraisal. After the IIM had sanctioned the proposal in principle the sanction of the executive committee of UTI was obtained. On June 1, 1978, UTI wrote to the company with reference to the letter of May 29, 1978, stating that it was aggreeable in principle to provide financial assistance along with other institutions of Rs. 300 lakhs for financing a part of the company's modernisation programme upon the terms and condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the institutions could not, and had not investigated. On June 17, 1979, the freezing order was passed. A copy was received by the company on June 19, 1978. It is in evidence that the company did not disclose to the Berlias or their attorneys a copy of the freezing order or its contents, even when demanded, and that it was disclosed to them only two days before the 1978 AGM, when the company was called upon to produce it in court at the time of the interim application in the writ petition filed to challenge it. This conduct speaks of animus. On June 23, 1978, the CLB asked the company to clarify, how UTI could exercise its option for conversion of debentures into equity shares when no debentures had been issued to it. A reply was sent by the company; it is, I think, a fair reading of it to say that it contains no such clarification. It appears from the record that, whatever UTI's earlier intentions might have been to acquire shares in lieu of conversion, they ceased after this letter of the CLB. At the 1978 AGM, by reason of the undertaking given and recorded in the interim order passed in the writ petition, the Berlias voted in favour of the resolution under section 293 to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir votes on their existing shares and on proxies secured by them, that the Berlias had the capacity to muster a sufficiently large number of proxies to worry the company's directors and the institutions, and that, moments after the execution of the debenture trust deed that made a month's notice a pre-requisite for conversion, the company waived, as agreed at some prior date, this prerequisite. Without such waiver shares upon conversion could not have been issued to the institutions at the time they were, they could not have been issued before June 28, 1979, the date of the company's AGM. Having regard to this, I have no doubt that the plaintiffs have established the prima facie case that the waiver was actuated by the desire to increase the voting strength of the institutions at the AGM of June 28, 1979, and thus counter the votes and proxies of the Berlias. No director or officer has been examined to refute the prima facie case. In fact, none of the defendants has examined a witness, who could depose as to what transpired in those last days of May, 1979, or at the meeting of May 31, 1979. I am reluctantly but inevitably impelled to the conclusion that no witness upon this aspe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and possibly the existing shareholders". He held that the directors' motive of keeping out the Singhania group, who were not yet shareholders but were strangers, did not prejudicially affect the company or the existing shareholders and the presence of such further motive could not vitiate the good motive of finding the necessary funds for the company. In the instant suit, a prima facie case of dolus malus and breach of fiduciary duty is established. No evidence is led by the company of its motives, whether mixed or otherwise. Upon the reasoning in Nanalal Zaver [1950] 20 Comp. Cas. 179 (SC), the court must interfere. In the case of Needle Industries ( India) Ltd. v. Needle Industries Newey (India) Holding Ltd. [1981] 51 Comp. Cas. 743 (SC), directors forming the requisite quorum resolved to increase the share capital of the company with the intention of complying with the provisions of the FERA as to foreign holdings. The issue of the shares was challenged on the ground that it constituted an abuse of fiduciary power. A substantial portion of the judgment is devoted to the consideration of what constitutes a breach of fiduciary duty by a company's directors. Several judgments of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the company. If they had given such evidence it would not have been possible for the plaintiffs' counsel to argue or for the court to hold that such belief was unjustified, the only question would have been: did they really so believe ? In Howard Smith Ltd. v. Ampol Petroleum Ltd. [1974] AC 821, 835, the Privy Council quoted with approval Viscount Finlay in a Scot's case (Hindle v. John Cotton Ltd. [1919] 56 Sc. LR 625, 630, 631): "Where the question is one of abuse of powers, the state of mind of those who acted, and the motive on which they acted, are all important, and you may go into the question of what their intention was, collecting from the surrounding circumstances all the materials which genuinely throw light upon that question of the statement of mind of the directors so as to show whether they were honestly acting in discharge of their powers in the interests of the company or were acting from some bye-motive, possibly, of personal advantage, or for any other reason." I conclude that the prima facie case, which is not refuted, is established that the company's directors exercised the power of waiver with the object of adding to the voting strength of the institu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause in a convertible debenture, if the sanction by the special resolution was given before the option was inserted as a covenant. In the alternative, if sanction could be given only after the "proposal to increase the subscribed capital by allotment of further shares" had fructified, that is, by the actual exercise of the option, then the language of sub-section (1A) would preclude any application of that sub-section to such a situation. This interpretation, however, was completely against the meaning of the section as a whole as could be gathered from a reading of it, including sub-section (3). The section contemplated that sub-section (1A) would apply if the conditions laid down in the proviso to sub-section (3) were not fulfilled, and sub-section (1A) would apply to "the increase of subscribed capital of a public company caused by the exercise of the option attached to such debentures". In other words, sub-section (3) negatived any suggestion that sub-section (1A) was not to apply to such increase of subscribed capital caused by the exercise of such option. Again, the wording of sub-section (3) would have been different, if a special resolution passed before the option was gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the special resolution the offer or the option is bad. It would mean, in the instant case, that there being no special resolution, the clause in the debenture trust deed providing the option is bad. This the plaintiffs may not urge having given up the challenge to the debenture trust deed. But, Mr. Cooper said, "further shares aforesaid" in sub-section (1A) must be read in the context of "where....................it is proposed to increase the subscribed capital of the company by allotment of further shares" in the opening portion of section 81. This must be done. Mr. Cooper submitted that in the case of options given to convert debentures (or loans) into shares the proposal to increase the capital of the company by allotment of further shares would come to be only after the option was exercised. He submitted that, therefore, the special resolution was not a precondition to the giving of the option but to the issue of the shares upon the exercise of the option. Once the company makes an offer under sub-section (1) or (1A) and the offer accepts it, the company is bound to allot the shares accepted. Similarly, once the company gives to any person the option to call for shares, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qualification would, in my view, be unjustified, the more so as it would be done without hearing the debenture trustee, who is not a party to the suit. As it stands, then, the validity of the option clause in the debenture trust deed is impeached by the argument that the impugned phrase in clause (b) of the proviso to sub-section (3) of section 81 is ultra vires the Constitution. By reason of the statement made on their behalf, the plaintiffs cannot be allowed to impeach the validity of any part of the debenture trust deed. The constitutional argument cannot, therefore, be permitted. The position is firmly established, in the field of constitutional adjudication, that the court will decide no more than needs to be decided in any particular case. (See Dr. Vasant Kumar Pandit v. Union of India, AIR 1982 SC 710 at 724). Bearing this in mind and having regard to the position that, first, the constitutional argument is not open to the plaintiffs and, secondly, that by virtue of my finding on the aspect of mala fides a decision of the constitutional question would be more than needs to be decided in this case, I refrain from discussing the arguments that were advanced before me on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgued that relief in favour of the plaintiffs should not, in any event, be given by reason of acquiescence, laches and ratification. It was submitted that, having regard to the knowledge of the plaintiffs as shareholders or their means of knowledge, and the plaintiffs' acts of positive assent, the plaintiffs were not entitled to the equitable relief of rectification. It was submitted that by reason of the plaintiff's acquiescence at the meeting of June 29, 1978, and their unconditional undertaking to vote in favour of the resolution under section 293, amended to include debentures of the value of Rs. 350 lakhs, they were precluded from urging that any part of the issue of convertible debentures were for any reason void. It was also submitted that the plaintiffs were not entitled to the relief because of their acts at and in connection with the AGM of May 15, 1980. The second plaintiff as a director was a party to the directors' report which acknowledged that 51,000 shares were duly issued upon conversion, and to the balance-sheet whose accuracy must be assumed, which showed an increase in the capital due to the issue of the shares and a decrease in the amount of the loan from Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company, and the shareholders had acquiesced in the transaction, the company and the shareholders were precluded from disputing their liability to repay the advance. They were bound by acquiescence not to recognise the instruments as valid debentures, but to accept their liability for the advances, regarding the debentures as nothing more than evidence of the debt. In V. N. Bhajekar v. K.M. Shinkar [1934] 4 Comp. Cas. 434 (Bom.); 36 Bom. LR 483, it was held that a company cannot confirm or ratify anything which is beyond its powers, express or implied, in the memorandum or conferred by statute. Short of that, a transaction by the directors which is beyond their own powers but within the powers of the company can be ratified by a resolution of the company in general meeting or even by acquiescence, provided that the shareholders had knowledge of the facts relating to the transaction to be ratified or the means of knowledge are available to them. Mr. Cooper submitted that acquiescence at the time the impugned action was in progress was different from acquiescence after the act. In the latter case the right to challenge the action had vested and could not be divested except by wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal considerations. A right of action had then vested in him, and a mere delay to take legal proceedings to redress the injury could not, by itself, constitute a bar to such proceedings, unless the delay on his part, after he had acquired full knowledge had affected or altered the position of his opponent. It followed that delay would count against any person who had shown quiescence under the circumstances from which assent could be reasonably inferred as a matter of a legal inference. In Willmott v. Barber [1880] 15 Ch D 96, Fry J. observed (p. 105): "It has been said that the acquiescence which will deprive a man of his legal rights must amount to fraud, and in my view that is an abbreviated statement of a very true proposition. A man is not to be deprived of his legal rights unless he has acted in such a way as would make it fraudulent for him to set up those rights. What, then, are the elements or requisites necessary to constitute fraud of that description ? In the first place the plaintiff must have made a mistake as to his legal rights. Secondly, the plaintiff must have expended some money or must have done some act (not necessarily upon the defendant's land) on the faith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Comp. Cas. 377, this court held that there could be no ratification except with full knowledge of the facts and the shareholders were never asked to ratify the resolution in question in that suit after the facts were made known to them. In the context of notice the court approved the observations of a Division Bench of the Calcutta High Court in Shalagram Jhajharia v. National Company Ltd. [1965] 35 Comp. Cas. 706 , 740 thus : "As the legislature has thought it fit to provide that shareholders must approve of the appointment of selling agents the opportunity given to the shareholders must be full and complete and there must be a full and frank disclosure of the salient features of the agency agreement before the shareholders can be asked to give their sanction. The provision for inspection of the agreement at the registered office of the company is not enough. Few shareholders have either the time or the inclination to go to the registered office to find out what the company is about to do. Moreover, such an opportunity is illusory in the case of shareholders who do not live in Calcutta when the registered office is situate here." In Tilakdhari Lal v. Khedan Lal, AIR 1921 PC 112, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed December, 1979, was signed and the directors' report was approved. They were considered and adopted at the AGM of May 15, 1980, when both the plaintiffs were present. There is nothing in the balance-sheet, the accounts or the directors' report which would suggest the fact of the waiver. It is not shown nor is it the defendants' case that the fact of the waiver was disclosed at the board meeting or that any disclosure was made which could have suggested that the act of waiver had occurred. It was urged further that the plaintiffs should be deemed to have constructive notice that the debentures were issued on May 31, 1978, and the shares on conversion were issued on June 5, 1978, by reason of the annual return filed by the company with the Registrar of Companies. A copy of the annual return is on record. Assuming that, it would not disclose the fact of the waiver to the plaintiffs. That fact they could have inferred only if after inspecting the annual return they had inspected the debenture trust deed at the company's office and ascertained the terms of conversion. This does not appear to be the basis upon which the doctrine of constructive notice can be applied, and that to spell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put in cross-examination that the issue of the circular had been authorised by him but the plaintiffs had not gone into the witness box to prove that case. That the undertaking to vote in respect of section 293 resolution at the 1978 AGM, given at the hearing for interim relief on the writ petition challenging the freezing order, is not mentioned in the plaint. That the issue of debentures is challenged in the plaint but the issues relative thereto had not been pressed. That, though the plaint stated that the shareholders objected to the conversion option at the 1979 AGM, this had not been proved. That the allegations against the Controller of Capital Issues and the Company Law Board contained in the plaint had not been pressed. Now, it is true that to the witness Goculdas the case was put in cross-examination that the circular had been authorised by him and that the plaintiffs did not go into the box to substantiate that case. Goculdas' evidence must, consequently, be accepted that the circular, in so far as it was purported to be signed by him, was false. It is also true that many of the issues raised on the basis of the averments made in the plaint have not been pressed. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on behalf of the defendants 1 to 7 :. Issue No. 1 In the negative. Issue No. 2 In the negative. Issue No.3 In the negative. Issue No.4 In the negative. Issue No.5 In the affirmative. Issue No.6 Not necessary. Issue No.7 In the negative, in the sense that the exact number of equity shares has not been established. Issue No.8 The suit is maintainable. Issue No.9 The plaintiffs are entitled to urge the contention. Issue No.10 Not pressed. Issue No.11 In the negative. Issue No.12 Not pressed. Issue No.13 Does not service. Issue No.14 In the negative. Issue No.15 In the negative. Issue No.16 In the negative. Issue No.17 There was power to waive the notice. The act of waiver is, how-ever, vitiated by mala fides. Issue No.18 The 1st to 7th defendants were party to the abuse of power in relation to the issue of the shares. Issue No.19 In the affirmative. Issue No.20 In the negative, this issue was not pressed in final argument. Issue No.21 In the affirmative, in the sense that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order : - It is declared that the entry upon the Register of Members of the 8th defendant as and from June 5, 1979, of the names of the 1st, 2nd, 3rd, 4th, 5th, 6th and 7th defendants in respect of the 43,750 shares, particulars whereof are given in Exhibit S to the plaint, is bad and illegal. The 1st to 7th defendants shall as and from June 5, 1979, continue to hold the debentures in conversion of which the said shares were issued. The 1st to 7th defendants shall not have an option to convert any of 11% privately placed debentures into shares. It is ordered and decreed that the 8th defendant do rectify its Register of Members by deleting therefrom the names of the 1st to 7th defendants as holders of the said shares. The 1st to 7th defendants are permanently restrained from exercising any voting rights in respect of the said shares in any manner whatsoever. The 8th defendant is permanently restrained from paying to the 1st to 7th defendants any dividends in respect of the said shares. The 8th defendant is ordered and directed to carry out in its books and registers all alterations consequent upon this order within 30 days from today and to give to the Registrar of Companies all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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